What do lenders require for a business loan?

Applying for a business loan can be a big step, one that may help you invest in growth, cover key expenses, or smooth out cash flow. It can also feel intimidating if you’re not sure what lenders need or how to prepare.

In general, lenders aren’t looking for reasons to say no. They’re looking for clear evidence that repayment makes sense: steady cash flow, solid documentation, and a straightforward plan for how the money will support your business.

And the payoff can be real. The 2025 Intuit QuickBooks Small Business Financing Report found that small businesses using business financing are almost twice as likely to be in a growth phase (54%) compared with those relying on personal funds (28%).

Let’s break down the key requirements lenders commonly use to evaluate your application, so you can go in prepared and feel in control.

Essential documents lenders require

Most lenders ask for a standard set of documents to review your application. If you gather these first, the process tends to feel much more manageable, and you’re less likely to hit delays.

Personal and business identification

Lenders need to confirm who they’re lending to and how your business is legally set up. You’ll typically be asked for:

• Government-issued photo ID (driver’s license or passport) for each owner
• Tax IDs (your SSN for identity checks and your business EIN)
• Business licenses and registrations (if required where you operate)
• Formation documents (articles of organization/incorporation, an operating agreement, or a partnership agreement)

Quick tip: If your business has multiple owners, lenders often request documents for anyone with meaningful ownership.

Financial statements

Your financial statements help lenders understand the health of your business. They’re looking for a clear picture of revenue, expenses, and whether cash flow can support a new payment.

Common requests include:

• Profit and loss (P&L) statement: Shows revenue and expenses over time
• Balance sheet: Shows assets, liabilities, and equity
• Cash flow statement: Shows how cash moves through the business
• Tax returns: Many lenders request business returns (often up to two years). Some may also ask for personal returns, especially if the business is newer.

Quick tip: If your bookkeeping and tax returns don’t match perfectly, don’t panic. Just be ready to explain why (for example, timing differences or one-time expenses).

Banking information

Bank statements back up what’s shown in your financials and help lenders see day-to-day cash flow.

You may need:

• Business bank statements (typically three to six months)
• Personal bank statements (sometimes requested for startups or very small businesses)
• Accounts receivable aging report (who owes you money and when it’s expected)
• Accounts payable aging report (what you owe and when it’s due)
• Debt schedule: Existing loans, credit cards, and credit lines, plus monthly payments and payoff amounts

Credit requirements for business loans

Credit matters because it’s one of the quickest ways a lender can estimate risk. Strong credit can improve your approval odds and may help you qualify for better rates and terms.

Business credit score

If your business has been around for a while, it’s worth paying attention to your business credit, too. Unlike personal credit, business credit scores are built from your company’s borrowing and payment history and are typically pulled from business credit bureaus like Dun & Bradstreet, Experian Business, and Equifax Business.

A stronger business credit profile can make it easier to qualify for financing, and it may help you rely less on your personal credit over time. In many scoring models that use a 0–100 scale, a score above 75 is often considered strong, though lenders and scoring systems can vary.

Time in business and revenue requirements

Lenders want to see that your business is stable enough to handle a new payment. Two common signals are how long you’ve been operating and how consistent your revenue is.

Minimum operating history

In general, a longer track record can make approval easier.

• Traditional banks: Typically look for at least two years in business to demonstrate a solid track record.
• SBA loans: SBA doesn’t set a fixed time‑in‑business rule, but many lenders prefer around two years of operation, and some microloan programs may be more flexible.
• Alternative lenders: Some lenders may work with businesses as young as 6–12 months, focusing more on current cash flow than long-term history.

Revenue thresholds

The specific revenue requirements depend on the lender, the loan type, and how much you’re asking for, but revenue is typically always part of the decision.

Here’s how it generally breaks down:

• Traditional bank loans often look for annual revenue in the range of $100,000-$300,000, especially for larger loan amounts
• SBA loans don’t have a set revenue minimum under SBA rules, but many lenders and programs may require anywhere from tens of thousands to $100,000+ in annual revenue.
• Online lenders might accept lower annual revenue (e.g., around $50,000+) for smaller loan amounts.

Monthly revenue can be equally important. Many lenders want to see consistent monthly deposits that exceed your projected loan payment by a comfortable margin.

Collateral and down payment expectations

Some loans are secured, which means you pledge an asset to back the loan. From a lender’s point of view, collateral lowers risk because there’s something they may be able to recover if the loan isn’t repaid. Not every loan requires collateral, but when it does, it’s a normal part of how that financing is structured.

Common types of collateral

What you can use depends on the loan type and what your business owns. Common examples include:

• Real estate: Commercial property (and sometimes personal property) can be among the most valuable forms of collateral.
• Equipment and machinery: For equipment financing, the equipment you’re buying often helps secure the loan.
• Inventory: Unsold inventory can sometimes be used, though lenders may value it conservatively.
• Accounts receivable: Unpaid invoices can support certain products, like invoice factoring or financing.
• Personal guarantee: Many small business loans also include a personal guarantee, meaning the owner agrees to repay the debt personally if the business can’t.

Down payment requirements

Some lenders also want you to contribute some of your own funds—often called “skin in the game.” This shows you’re invested in the outcome and can help reduce the amount the lender is taking on.

Down payment expectations vary by lender and loan type. In general:

• SBA 7(a) loans: Typically involve an equity injection of around 10% or more, especially for real estate or business acquisitions, depending on the lender and deal structure.
• Commercial real estate loans: Usually 20-30% down
• Equipment financing: Some options allow little or no money down, while others may call for 10–20% or more
• Working capital loans: May not require a down payment, since approval is often based more on cash flow than on a specific asset.

Industry-specific requirements

Some industries get a closer look during underwriting, and that doesn’t mean there’s anything wrong with your business. It usually comes down to risk. If an industry tends to have tighter margins, seasonal swings, or more unpredictable revenue, lenders may ask for a little more detail to feel confident in repayment.

High-risk industries

Businesses in sectors with higher turnover or more variable income may be asked for additional documentation, stronger cash reserves, or more recent financials.

Common examples include restaurants and food service, construction, startups in emerging markets, healthcare services, and retail businesses.

If you’re in one of these spaces, it helps to be ready with clear records and context, like signed contracts, pipeline details, or a short explanation of seasonal trends.

Regulated industries

If your business operates in a regulated field, lenders typically need proof that you’re compliant with the rules that apply to your work. That might include:

• Professional licenses and certifications
• Compliance documentation
• Industry-specific insurance policies
• Regulatory approval letters

Tip: When compliance is part of your business, it’s worth keeping these documents in one place. It can help speed up the loan process and show lenders you run a well-organized operation.

Debt-to-income ratio considerations

When you apply for a business loan, lenders want to make sure your business can take on a new payment without getting stretched too thin. One of the main ways they may check this is with the debt service coverage ratio (DSCR). It compares the income your business generates to the debt payments you’re responsible for.

Here’s the basic formula:

DSCR = Net operating income ÷ total debt service

A DSCR of 1.0 means you’re bringing in just enough to cover your debt payments. A DSCR above 1.0 means you have breathing room, which lenders like to see. Many lenders look for a buffer (usually around 1.25) so there’s a cushion if you hit a slower month or an unexpected expense.

If your DSCR falls below 1.0, it can be a sign your current income may not fully cover your existing debt payments, let alone a new one. In that case, you may need to improve cash flow, reduce expenses, pay down debt, or adjust the loan amount before you’ll be in a stronger position to qualify.

Personal guarantees and co-signers

For many small businesses, especially newer ones, lenders may ask owners to personally stand behind the loan. It’s a common way lenders reduce risk when a business doesn’t yet have a long borrowing history or a large base of assets. In many cases, lenders request a personal guarantee from any owner with 20% or more ownership.

What a personal guarantee means

A personal guarantee means you’re agreeing to repay the loan personally if the business can’t. In other words, if the business falls short, the lender may be able to look beyond the business for repayment.

That can include assets like personal savings, home equity (depending on the agreement), and future personal income.

It’s a serious commitment, but it’s also one of the ways small businesses can access financing before they’ve built a deep business credit profile.

When co-signers help

If your credit or financials are close to the lender’s minimums, a co-signer with stronger credit may improve your chances of approval. A co-signer would be taking on equal responsibility for repayment, which gives the lender additional confidence.

Because it’s a shared obligation, it’s worth having a clear, honest conversation upfront—so everyone understands the terms, the risks, and the repayment plan.

Additional requirements by loan type

Most business loans ask for the same basics: clean financials, solid cash flow, and clear documentation. But depending on the product, lenders may also request a few extra details.

SBA loans

SBA loans are government-backed, but they’re still issued by private lenders. Because of that guarantee, the application process can be more detailed, and lenders may want to confirm you meet key eligibility requirements.

In general, you’ll need to show that you:

• Meet SBA size standards for your industry
• Operate as a for-profit business in the United States
• Have invested in the business (time, money, or both)
• Can demonstrate that you were unable to obtain similar credit elsewhere on reasonable terms (usually called the SBA “credit elsewhere” requirement)

Lines of credit

A line of credit gives you flexibility: you borrow what you need, when you need it. Because it’s revolving and can be used repeatedly, lenders want to feel confident that your business can manage ongoing access to funds.

They’ll typically look for:

• Strong, consistent cash flow to support changing payments
• Reliable banking history or an established relationship with the lender
• Ongoing reviews (many lines of credit are monitored and may be renewed annually)

Equipment financing

With equipment financing, the purchase itself is often central to the loan decision—because the equipment can serve as collateral.

You may be asked for:

• Invoices or quotes with detailed equipment specs
• Value verification (like an appraisal, depending on the lender and equipment type)
• A simple connection to revenue (i.e., how the equipment supports the work you do and helps you generate income)

Preparing for the loan application process

These steps may help improve your chances of approval when taken before applying.

Step 1: Review and improve your credit

Start by pulling your credit reports and looking for anything that doesn’t belong. If you spot errors, dispute them as soon as you can. It can also help to pay down existing balances, since lower debt can improve how lenders view your overall risk.

Also, try to avoid opening new personal credit right before applying. Even small changes can affect your score, and lenders like to see stability.

Step 2: Organize your documentation

Put together a simple loan application folder so you’re not scrambling at the last minute. A checklist helps here. Include your key business documents, recent bank statements, and up-to-date financial statements. If you work with a bookkeeper or accountant, make sure your reports are current and consistent.

And if there’s anything in your history that needs context (like a one-time dip in revenue or a temporary spike in expenses), write a short, clear explanation. Lenders don’t expect perfection. They do appreciate transparency.

Step 3: Strengthen your financials

If you have a little time before you apply, look for small ways to strengthen your business finances. That might mean increasing revenue where you can, tightening up expenses, or building a cash reserve. These modest improvements can help an underwriter see that your business has the cushion to handle a new payment.

Working with different lender types

Requirements can vary based on where you seek financing. The key is knowing what each lender type tends to prioritize, so you can choose the best match for your situation.

Traditional banks

Banks often have some of the most stringent requirements but may offer competitive rates. They typically require strong credit (680+), solid financials, adequate collateral, and a detailed business history.

Credit unions

Credit unions are member-owned and can be more flexible than banks. They may accept lower credit scores and may focus heavily on relationship banking, offering more personalized underwriting.

Online lenders

Online lenders can offer speed and convenience. For example, QuickBooks Term Loans allow qualified customers to apply directly through their software, leveraging existing business data for a streamlined experience. Online lenders may also accept lower credit scores and offer streamlined documentation.

Alternative financing

If traditional loans aren’t the right fit, there are other ways to access capital. Common options include:

• Invoice financing or factoring (based on unpaid invoices)
• Merchant cash advances (based on card sales volume)
• Crowdfunding (raising money from supporters or customers)

These options can be helpful in the right situation, especially if timing is critical. Just make sure you understand how repayment works and what the total cost looks like before you commit.

Red flags that hurt your application

Certain issues can slow down your loan application or result in unfavorable terms.

Financial warning signs

Lenders want to see stable cash flow and responsible money management. These patterns can raise concerns:

• Inconsistent revenue or a clear downward sales trend
• Negative cash flow or ongoing operating losses
• High debt load compared to income (limited room for a new payment)
• Frequent overdrafts or NSF fees
• Tax liens or court judgments

If any of these apply, it doesn’t necessarily mean “no.” It does mean you’ll want a stronger explanation, better documentation, or a plan to improve the numbers before you apply.

Documentation problems

Even a healthy business can run into trouble if the paperwork is incomplete or doesn’t line up. Common red flags include:

• Incomplete or disorganized financial records
• Income numbers that don’t match across your application, bank statements, and tax returns
• Missing tax returns or unfiled taxes
• Unexplained gaps in business history or ownership changes

A lender should be able to follow your story from document to document. The clearer and more consistent your records are, the smoother the underwriting tends to go.

Credit issues

Credit helps lenders understand how you’ve handled debt in the past. These issues can limit options or lead to higher rates:

• Recent bankruptcies (often within the last few years)
• Foreclosures or repossessions
• Multiple late payments
• High credit utilization
• Recent collections or charge-offs

If your credit has a few dents, focus on what you can control: paying on time, lowering balances, and giving your score time to recover. Pair that with strong cash flow documentation, and your application may still be competitive.

How long the approval process takes

Timeline expectations vary by lender and loan type:

Position your business for growth

A loan is simply a tool. When used well, it can help you upgrade equipment, cover payroll, manage cash flow, and build momentum when it counts. You’ve already built your business. Now, give it the support it needs to keep growing.

If you use QuickBooks, a term loan or line of credit may be an option worth exploring that fits your goals.

QuickBooks Term Loan and QuickBooks Line of Credit loans are issued by WebBank.